Civil Procedure Flow Chart Available

Below is a link to a civil procedure flow chart which I hope will help foreign lawyers better understand China’s Civil Procedure Law. There are Chinese websites  that have also posted flow charts for Civil Procedure Law (CPL) milestones that Chinese readers may wish to consult.

I am particularly interested in highlighting areas where foreigners should be concerned because their impact may be poorly understood, such as rules or average time frames regarding service of process or length of time that a trial might take if there is a foreign element.

If readers have any suggestions on how this chart can be improved please post here or email to me at chinaipr@yahoo.com.

Due Process and ASI’s: Wuhan and Texas

Attached is the December 25 decision of the Wuhan Intermediate Court (Chinese language only) (the “Decision”) in the matter of Samsung v. Ericsson, about which I previously blogged.   The Fosspatents blog has also posted some of the other recent filings in the E.D. of Texas, including former Chief Judge Rader’s expert opinion, and the patent infringement case recently filed by Ericsson against Samsung.

I will focus here on the procedural elements of the Wuhan case (Samsung v. Ericsson). 

Anti-Suit Injunctions (“ASI”) are often discussed as if they were a “first to file” priority right where timing is critical.  In the Huawei v. Samsung ASI case in the Northern District of California and Shenzhen, the separation in filing times between the two case was likely a matter of hours, owing to time zone differences between the West Coast and California.   However, timing is not the only determinant of whether an ASI should grant.  It is certainly less critical if there are forum selection clauses in contracts between the parties.  In Microsoft v. Motorola, an earlier SEP ASI case, other factors such as whether one case would be dispositive of another, and the jurisdiction’s interest in limiting forum shopping, were determined to be supportive of the lower court’s decision to grant an ASI.  

In terms of the first court to grant an ASI, the Wuhan court comes out ahead, but only nominally.  The Decision granting Samsung’s Anti-Suit Injunction (ASI) was signed by five judges of the Wuhan Intermediate Court on Friday December 25, 2020, a US holiday.  Counting for the difference in time zones, this is only one business day ahead of Judge Gilstrap’s Anti-Anti Suit Injunction decision/ TRO of the morning of Monday December 28, 2020.    

To the extent that the Samsung ASI was intended to thwart the original exercise of jurisdiction of Judge Gilstrap, it also came a few days too late. Samsung requested the ASI on Monday December 14, 2020 (Decision pp. 1, 2).  Ericsson had brought suit in the Eastern District of Texas on Friday December 11, 2020. 

As the preceding indicates, the difference in time between different filings is often quite nominal.  The gaps in time were considerably shorter than the “several months into… the domestic litigation” behavior of Motorola in Microsoft v Motorola.  Comparisons might also be made to the slower docket in Xiaomi v Inter Digital case in Wuhan, which involved three of the five judges to the Samsung v. Ericsson dispute, and which was initiated on August 4, 2020 with an ASI decided on September 23, 2020. 

Samsung comes up especially unfavorably when taking into consideration the adequacy of notice to the adverse party.  Samsung sued on December 7, 2020 in Wuhan (qisu/起诉) (Decision, p. 5).  Ericsson had filed its case in Texas on December 11, 2020. Samsung filed it request for an ASI on December 14, 2020. There is no record in the Decision of service or notice having been delivered to Ericsson for the initiation of the case, or on the motion for an ASI, although 18 days had elapsed since the case was accepted on December 7, and 11 days had passed Samsung requested its ASI.  Samsung left Ericsson operating in legal darkness.

In Chinese civil procedure and practice, there are several periods of case opacity where the court de facto condones secrecy.  These periods can include: before a case is accepted; when service of process is being made; when a final decision is being reached and an adjudication committee of outside judges may be involved; and when a decision is made to publish a judgment and a case may be written or denied publication on political grounds.  The first period is the most germane here.

A party initiates a case by “suing” (qisu).  When a party “sues” it should file a complaint that meets the minimal criteria set forth in Article 119 of the  Civil Procedure Law (CPL).  These criteria include indicating: a party in interest, an actual defendant, an actual complaint with facts and reasons, and appropriate jurisdiction.   The court has seven “opaque days” to “accept and review” (shouli/受理) the complaint.  After acceptance and review,  the case will be “established” (li’an/立案).  Docketing, assignment of judges and service of process follows thereafter.   The relevant terms are drawn from the CPL, particularly Art. 123.  The Wuhan court generally adheres to this statutory nomenclature in its Decision. 

In Huawei vs Conversant, the Supreme People’s Court looked at case acceptance as one milestone event in determining the priority of filings (p. 9). However, I believe that the Chinese case acceptance procedure, despite recent reforms, lacks adequate transparency for significant international rights to be affected without further inquiry.  Case acceptance has long been the subject of criticism and concern from both domestic and foreign litigants.  See Liu Nanping and Michelle Liu, “Justice Without Judges: The Case Filing Division in the People’s Republic of China,” 17 U.C. Davis J. Int’l L. & Pol’y 283 (2011), and my blog.  Concerns about discretion and opacity in case acceptance decisions have also caused foreign litigants to make “noisy” filings in China before a holiday which involve an immediate press conference after the filing in order to limit the risk that a case suddenly appears that was filed in advance of another filing. 

At this time, further information is needed in order to substantiate the December 7 filing date.  Case acceptance is not automatic and can be denied or accelerated for a variety of reasons, including the political sensitivity of a case, such as in environmental matters.  The Decision states that Samsung sued on December 7 (p. 5), and that case was accepted and established  on the same day (pp. 2, 5).  It is possible that Samsung filed its case and the court reviewed and accepted and reviewed the same day.  However, by law, the Wuhan court had a week to review the case.  Moreover, accelerating review during December might have been difficult because this case acceptance was accomplished during a pandemic and the end of the year is also typically a busy time for China’s IP courts when they try to resolve all pending cases for that year.  Hubei Province, where Wuhan is located,  has also had an unusually high increase in IP-related litigation.  In 2019 alone the province’s IP docket of cases “accepted and reviewed”  increased by 100%  to a total of 20,825 cases.  While a December 7 filing, review and acceptance is not impossible, it is also likely that there were other reasons that all three of these tasks were accomplished on one day.   For example, Samsung may have sued during the week prior to December 7 and was required to make changes to its filing, or perhaps the court decided that it would permit Samsung to enjoy a filing date of December 7 due to problems that may had arisen later during the review process.   A case acceptance date clearly is more ambiguous in its significance than a US court filing made with the Clerk of the Court.

US courts increasingly have to concern themselves with problems posed by lack of transparency of this type.  The US Supreme Court has had to grapple recently with these issues.  In Animal Sci. Prods., Inc. v. Hebei Welcome Pharm. Co., 138 S. Ct. 1865, 1873-74 (2018), the Court noted that “the transparency of the foreign legal system” is one factor in China in determining the level of deference that should be given to the Chinese legal system. In a recent University of Pennsylvania Law Review  article, “Illiberal Law in American Courts” (May 2020), Mark Jia has noted that China’s legal regime has increasingly imposed difficult questions for US judges.  Ultimately, he advises “American judges … [s]ometimes …must decide whether the foreign legal system is fair.”

There are now numerous IP cases where foreign judges have decided that Chinese courts failed to provide adequate notice or procedural transparency.  The Delhi High Court in Inter Digital v Xiaomi,  noted in its AASI decision that the parallel Wuhan case “appear[s] to have been less than fair, not only to the plaintiff, but also to this Court.” Judge Kaplan in Vringo v. ZTE, another SEP dispute, noted that:  “Vringo long remained entirely unaware of the Shenzhen litigation.  It was not until June 26, 2014 – more than four months after the lawsuit was initiated – that it received a copy.”  In a non-SEP case involving semiconductor manufacturing equipment, and a US company,  Veeco, a preliminary  injunction was issued “without providing notice …  and without hearing”  in order to undermine a long pre-existing foreign proceeding in the Eastern District of New York.   Knowles, another US corporation, which was sued in China in retaliation for filing a Section 337 patent action, was also barred from attending legal proceedings and stated that “a fair trial is impossible.”  In antitrust actions, including IP-related antitrust actions, the situation had become so severe that the US government had to obtain a promise from China that it would “allow Chinese practicing lawyers to attend and participate in meetings with any of the three [anti-trust agencies].”   Still worse, foreign lawyers have complained that company officials have been threatened with arrest if they did participate in meetings in China, and there have been rising concerns of detentions of foreigners as commercial hostages including during the pendency of civil litigations

As Mark Jia notes, this is within the discretion of the presiding judge.  While judicial procedures vary from nation to nation, delays in notification to adverse parties can raise concerns about violation of generally accepted standards of IP litigation, as reflected in the TRIPS Agreement.  That agreement requires “timely” written notice of “civil judicial procedures” to the parties as well as the right to an “independent counsel” (Art. 42 “Fair and Equitable Procedures”). 

There are other, troubling aspects of the December 25 decision. The court appears to base its jurisdiction on SEP cases being global and affecting Chinese and other national and territorial courts (pp. 2, 11).  It therefore has jurisdiction over “global licensing conditions, including licensing rates” (p. 7).  The court does not explain its departure from prior Chinese practice, such as the Guangdong SEP Guidelines, which would authorize a court to consider a worldwide rate setting if the parties agreed to it, nor does it consider whether it is the optimal form for these disputes.  Long-standing US precedent for ASI’s also establishes that “comity teaches that the sweep of the injunction should be no broader than necessary to avoid the harm on which the injunction is predicated.” (Laker Airways v. Sabena, 731 F.2d 909, 933 n. 81 (D.C. Cir. 1984)).  The court also adopts an anti-trust like approach to granting the ASI, by looking at harm to consumers and competition if an infringer were to be enjoined (p 10, para. 4). A thoughtful analysis of the choice of law and ASI issues could likely have helped de-escalate and de-conflict the issues. To rub salt further into the choice of law wound, the ASI extends to access to all courts, including those of the United States, and thereby includes US patent matters (Decision, p. 12, para. 2).  

To be fair, Chinese courts’ entry into the “global SEP litigation” arena in 2020 has been preceded by global rate setting decisions elsewhere in the world, including the recent Conversant and Unwired Planet cases in the United Kingdom.  Additionally, the Chinese courts have been instructed to take a more aggressive approach to international parallel litigation. The court at this stage should, however, also be committed to the increase of procedural fairness  as well as careful legal analysis in order to minimize friction among the parties and with other jurisdictions.

Updated on January 5 & 11, and Feb. 21, 2021 to correct minor typographical errors.

Supreme People’s Court Calls for Public Comments on Enforcement of Intellectual Property Judgments

Addendum of April 18, 2020: Here is an English language unofficial translation of the Implementation Plan and the Guidelines for reference purposes.  If you see any errors, please advise us by comments on this blog.  The translation is provided with no representations or warranties of any kind as to content.  Readers should consult with the Chinese original in the links above, as the translation has no legal significance.  The translation is courtesy of USPTO, which claims no responsibility for any inaccuracies in the translation.

On March 15, 2020, the Supreme People’s Court of China issued a notice soliciting public comments on the Implementation Plan for the Enforcement of Intellectual Property Judgments (Draft for Public Comment) 知识产权判决执行工作实施计划(征求意见稿)and the Guidelines for the Enforcement of Intellectual Property Judgments (Draft for Public Comment) 知识产权判决执行工作指南(征求意见稿 ). Comments are due on May 15, 2020. 

According to one online commentator, one reason for these documents is that in recent years, after the establishment of the punitive compensation mechanism for intellectual property rights in China, a large number of court-enforced cases have emerged. In fact, difficulties in enforcing judgments have been of concern to China’s leadership and the Supreme People’s Court for several years and appear to be independent of the possibility of increased punitive damages. President Xi Jinping identified this issue of enforcement difficulty 执行难 in the Fourth Plenary Session of the 18th CPC Central Committee (2014). The SPC further proposed to solve this problem in two to three years at the Fourth Session of the 12th National People’s Congress. SPC President Zhou Qiang also raised this issue in a report in 2018. None of these high-level pronouncements particularly singled out intellectual property as an area of enforcement concern.

In general enforcement issues that have concerned China involve enforcement of judgments. SPC President Zhou Qiang identified that China has faced such enforcement issues as: (1) judicial difficulties in locating the person and their property because the judgment debtors conceal their property and whereabouts; (2) the traditional liquidation method is subject to a long cycle with a low success rate, and corruption often occurs during liquidation, so the court is unable to liquidate the property to be enforced; (3) local governments and powerful personnel commit corruption and intervene and hinder the enforcement; (4) many unenforced cases accrue year after year, which has led to serious social conflicts.

Enforcement issues that foreigners have identified have included matters arising as part of the judgment, and often before the execution of the judgment including increased infringement compensation, jurisdictional issues of court enforcement, the procedures when a party initiates an enforcement action, enforcement procedures of pre-litigation preservation, enforcement of administrative remedies and criminal remedies including civil compensation for criminal cases, etc.  

This is the first time that the Supreme People’s Court has formulated an implementation plan and work guidelines specifically for intellectual property rights enforcement. While this move is explicitly aimed at strengthening the judicial protection of IP rights and ensuring that effective judgments on IP cases are enforced in accordance with the law, another purpose of this initiative is likely to fulfill China’s commitments under Article 1.28 of The Phase 1 IP Agreement of ensuring expeditious enforcement of IP judgments. Article 1.28 “Enforcement of Judgments” 判决执行 provides:

1.The Parties shall ensure expeditious enforcement of any fine, penalty, payment of monetary damages, injunction, or other remedy for a violation of an intellectual property right ordered in a final judgment by its own court.

2. Measures China shall take include executing work guidelines and implementation plans to ensure expeditious enforcement of judgments, publishing its work guidelines and implementation plans within one month after the date of entry into force of this Agreement, as well as publishing online quarterly reports of implementation results.

As the main part of the Implementation Plan, Section 2 “Specific Implementation Plan” 具体实施计划 includes the following provisions: filing of enforcement of IP judgment (Art. 1), pre-litigation preservation (Art. 2), how to quickly identify and control the property of the executed person (Art. 3), assets evaluation (Art. 5), assets disposal (Art. 6), obligations of the executed person (Art. 7), handling enforcement cases offsite (Art. 10), judicial publicity (Art. 12), etc.  Generally speaking, these provisions point to the specific measures previously promulgated by the SPC, rather than making headway in new policies or experiments, or suggesting more concrete measures or working methods. In this sense, the Implementation Plan highlights out IP judicial enforcement issues are tied to general enforcement concerns.

Addendum of April 18, 2020: Here is an English language and unofficial translation of the Implementation Plan and the Guidelines, for reference purposes.  If you see any errors, please advise us by comments on this blog.  The translation is provided with no representations or warranties of any kind as to content.  Readers should consult with the Chinese original in the links above, as the translation has no legal significance.  The translation is courtesy of USPTO.

According to Article 13 of the Implementation Plan, a special section of “Intellectual Property Judgment Enforcement Publicity” on China’s Enforcement Information Disclosure Website will be published by the end of June 2020, focusing on publicizing the implementation information of intellectual property judgments, so as to facilitate transparency, public understanding,  and supervision. This appears consistent with the requirement for publishing online reports of implementation results in the Phase 1 IP Agreement. In fact, as we have previously noted, the disclosure should not only be limited to the disclosure of the enforcement of IP judgments. In order to ensure that China’s civil enforcement is observable and accessible, China would need to publish all of its IP cases, including cases involving provisional measures, as well as dockets that may include motions and settlements. Many observers, including in this blog, have noticed a large drop in publication of foreign-related IP cases since approximately January 1, 2018, which should also be addressed. Finally, it is unclear from the text of the Implementation Plan or the Phase 1 Agreement, whether China intends to publish the actual enforcement decisions to the same extent that it publishes cases, notwithstanding that many enforcement cases are now available on the SPC’s official website.

In addition, over the past several years, there has been an increasing incidence of multinational IP disputes, particularly in technology sectors. As previously noted, the Phase 1 IP Agreement also does not address the problems arising from these cases. An added problem arising from SEP cases in particular, has arisen over anti-suit injunctions and whether China should issue its own anti-suit injunctions, which was the subject of a recent conference (January 2019) at Renmin University.

In terms of execution of foreign judgments, Article 7(1) of the Guidelines mention that: “If a foreign party applies for execution, it shall submit a written application for execution in Chinese. If there are special provisions in the mutual legal assistance treaty concluded or co-joined by the country where the party is located and China, the treaty provisions shall apply.” This provision noticeably omits any reference to the Article 282 of  Civil Procedure Law, which permits enforcement of foreign judgments on the basis of reciprocity. United States courts have also occasionally enforced Chinese money judgments, including those which have an IP-related element, under the Uniform Foreign Money Judgments Recognition Act.   According to Susan Finder, the SPC is working on drafting a judicial interpretation on this issue at some time in the future.

Based on the Implementation Plan and Guidelines, it remains unclear how the enforcement of IP judgments differs from other judgments and, indeed, why it should be different from other civil, criminal or administrative matters. In the past many judicial reforms have been tested in the IP context.  The past experience of initially testing legal reforms in IP than reaching out to other areas is less evident in these two documents.  While few new specific measures have been proposed, the SPC’s release of these documents does reflect its increasing emphasis on IP rights, perhaps undertaken in response to US pressure. 

Addendum of April 18, 2020: Here is an English language unofficial translation of the Implementation Plan and the Guidelines for reference purposes.  If you see any errors, please advise us by comments on this blog.  The translation is provided with no representations or warranties of any kind as to content.  Readers should consult with the Chinese original in the links above, as the translation has no legal significance.  The translation is courtesy of USPTO, which claims no responsibility for any inaccuracies in the translation.

Written by Mark A. Cohen with the assistance of  Xu Xiaofan